Analytics, Banks, Estonia, EU – Baltic States

"Unlike during the earlier quarters, during the last months of the year 2008, the domestic demand no longer was the main cause of the decline – exports of goods fell significantly as well," commented the Bank of Estonia the economic decline of 9.4% in the fourth quarter of 2008.

Significantly weaker economic situation in countries that are Estonia’s principal trade partners will increasingly affect Estonia’s exports. Production volumes of Estonia’s principal trade partners fell remarkably in October as well as in December. A major change occurred in Estonia’s industrial production output and in foreign trade in November and the decline trend continued in December.

The Central Bank noted that external demand might remain at a weaker level. According to current estimates, the signs of recovery of economic growth might be expected to take place in the year 2010.

The Bank of Estonia commented that Estonia’s labor market was not much affected by the consequences of cooling of the global economy during the last quarter of 2008. However, due to fast-decreasing demand on the domestic market as well as abroad, enterprises are looking for options to cut back expenses, which will among other things also mean cutting back the number of employees. The decline in the employment rate and an increase in the number of unemployed persons were particularly fast in December and in January, and the average indicators of the fourth quarter do not reflect these trends quite as much.